"the Nature Conservancy, which pays rice farmers to flood their fields
for the few crucial weeks each fall and spring. Rice growers routinely
flood their fields for irrigation and to decompose crop residue after
harvest; through the conservation program, named BirdReturns, they do so during periods when the fields would have been dry."

"A
team of ecologists and economists figured out how much to compensate
the farmers for this change. They ran “reverse auctions” in which
landowners specified the lowest payment that would entice them to flood
their fields for a given four- to eight-week period.

This
auction system adjusts payments to farmers’ costs. For example,
flooding during the end of the spring migration season is trickier to
fit into an annual rice-growing schedule, so bids — and payments — are
higher then. The auction model is also flexible when the weather
fluctuates. The early years of the program occurred during California’s
prolonged drought, but abundant rainfall in 2017 meant that BirdReturns
could dial back the amount of pop-up wetland it procured this year."

"The team predicts the birds’ migratory paths using crowdsourced data from amateur bird-watchers
and combines that data with satellite images of surface water, enabling
the establishment of temporary wetlands at the right times and places."

"My research looked at a conservation group’s program in Uganda that made
annual payments to farmers if they refrained from chopping down
forestland that they owned. The approach turned out to be a remarkably inexpensive way both to protect forests and to reduce carbon emissions."

"Buying up the forest outright and turning it into traditional reserves
not only would have cost more money, but it would have displaced
thousands of people from their homes."

"In
the Ugandan setting, a ban would deprive poor people of much-needed
income generated by selling timber or using newly cleared land for
agriculture.

Moreover,
a market-based approach can balance conservation goals with critical
needs like growing food. If a certain landowner is outstanding at
farming — producing a lot of food for the community — it could very well
make sense for her to continue to farm her land, even if doing so means
clearing some forest.

Ideally,
less productive farmers will participate in the program because food
production — and profit — sacrificed by keeping their forest intact is
small.

That’s
why proper pricing is important. If you offer an appropriate payment
for conservation, the best farmers will decline it because they can earn
more by expanding their farms, while the mediocre ones will sign up.
Markets can help us find those opportunities."

Parental investment hypotheses regarding mate selection suggest that human males should seek partners featured by youth and high fertility. However, females should be more sensitive to resources that can be invested on themselves and their offspring. Previous studies indicate that economic status is indeed important in male attractiveness. However, no previous study has quantified and compared the impact of equivalent resources on male and female attractiveness. Annual salary is a direct way to evaluate economic status. Here, we combined images of male and female body shape with information on annual salary to elucidate the influence of economic status on the attractiveness ratings by opposite sex raters in American, Chinese and European populations. We found that ratings of attractiveness were around 4 times more sensitive to salary for females rating males, compared to males rating females. These results indicate that higher economic status can offset lower physical attractiveness in men much more easily than in women. Neither raters' BMI nor age influenced this effect for females rating male attractiveness. This difference explains many features of human mating behavior and may pose a barrier for male engagement in low-consumption lifestyles."

With titles such as “genetic diversity officer,” “virtual
store sherpa” and “personal memory curator,” these roles aren’t science
fiction, the study’s authors argue. Rather, they are identified as jobs
many employers will have to fill within the next decade.

“It’s easier to understand what types of jobs are going to go away,” says
Ben Pring,
director of Cognizant’s Center for the Future of Work"

"Michael Reich, economics professor at University of California, Berkeley . . . disagrees with the grim no-jobs future that some envision. “Even if
an employer would love to replace all of their workers with robots to
make their cars, someone needs to be able to buy those cars made by
robots for the business to function.”

Several of the jobs that
Mr. Pring and his colleagues envision involve helping companies manage
artificial intelligence and automation. There is what the study calls
“data detectives:” workers who dig into their employer’s data stockpiles
and generate business recommendations. “Man-machine teaming managers”
will be needed to ensure machines and human workers collaborate in a way
that maximizes results, the study says, while “cyber city analysts”
will see that municipalities’ digital systems and processes function
smoothly."

"the study describes rising demand for “walker-talkers,” gig workers who
answer calls to assist and provide companionship for a growing elderly
population as people live longer. On the high-tech side,
“augmented-reality journey builders” will help design virtual-reality
experiences for consumers, the study projects."

"As many as 375 million workers around the world will need to find new
occupations or lose their livelihood to automation by 2030, the McKinsey
Global Institute estimates in a new report. It isn’t impossible for up
to 14% of the global workforce to retrain and refocus, but it requires
planning and the investment of will and resources, says
Susan Lund,
a principal at the Institute."

"The choices that policy makers and business leaders make about how to
support displaced workers, invest in education and training, and fund
job-creating projects in areas such as infrastructure and energy will
all affect the labor market, she says.

If governments and businesses choose wisely, global job
displacement could affect as few as 3% of workers, but that depends on
how quickly companies adopt automation tools, reconcile regulatory
issues, and adjust wage rates for workers, among other factors. Higher
wages, for instance, mean companies have more incentive to automate
tasks."

"Ms. Lund notes that support for displaced workers can include
guidance and career coaching as well as services such as transportation
and child care during job interviews. About 15% of all hours worked globally could be automated by 2030 using technology that is currently available"

"60% of all occupations could be at least partially automated with
current tools, though fewer than 5% are at risk of total automation."

"The new jobs that emerge may be the indirect result of technology’s contribution to higher productivity and rising incomes"

"More jobs will also be created to . . .
develop and maintain future technology . . . and to staff energy-efficiency initiatives."

Thursday, December 28, 2017

"The story goes like
this: Thomas Carlyle, a Scottish writer and philosopher, called
economics "the dismal science" in reference to Thomas Malthus, that
lugubrious economist who claimed humanity was trapped in a world where
population growth would always strain natural resources and bring
widespread misery. Dismal, indeed.

But this origin myth is,
well, mythical. Carlyle did coin the phrase "the dismal science." And
Malthus was, without question, dismal.

Economics, somewhat inconveniently for
Carlyle, didn't offer a hearty defense of slavery. Instead, the rules of
supply and demand argued for "letting men alone" rather than thrashing
them with whips for not being servile. Carlyle bashed political economy as "a dreary, desolate, and indeed quite abject and distressing [science]; what we might call ... the dismal science.”

Today,
when we hear the term "the dismal science," it's typically in reference
to economics' most depressing outcomes (e.g.: on globalization killing
manufacturing jobs: "well, that's why they call it the dismal
science," etc). In other words, we've tended to align ourselves with
Carlyle to acknowledge that an inescapable element of economics is human
misery.

But the right etymology turns that interpretation
on its head. In fact, it aligns economics with morality, and against
racism, rather than with misery, and against happiness. Carlyle couldn't
find a justification for slavery in political economic thought, and he
considered this fact to be "dismal." Students of economics should be
proud: Their "science" was then (as it can be, today) a force for a more just and, crucially, less dismal world."

Wednesday, December 27, 2017

By Noah Smith. He is a Bloomberg View columnist. He was an assistant professor of finance at Stony Brook University.

Here are my three favorites of the top ten (the others will all be listed below but you can read about them at the link above).

"2. “The Complacent Class: The Self-Defeating Quest for the American Dream,” by Tyler Cowen

My Bloomberg View colleague took a look at the U.S.
economy and society and saw a story of stagnation -- falling
productivity, declining geographic mobility, fewer startups, fewer
people moving between jobs and more people dropping out of the
workforce. He wove all of these trends, as well as his own cultural
observations, into a story of “complacency” -- of a society that had
become so good at delivering us the things we already know we want that
it never prods us to get out and find new goals and new dreams.

As cities become more important to the U.S. economy, the problem of
NIMBYs -- local landowners who oppose urban growth -- has received a lot
more attention. In San Francisco and other hot-tech hubs, rent has
skyrocketed as demand has increased with no concomitant increase in
supply. Hsieh and Moretti attempt to quantify just how much this is
hurting the economy, and they come up with some pretty eye-popping
numbers. Even if those numbers turn out to be too high, there’s a
growing economic consensus that urban land-use restrictions are a
problem that needs fixing."

"10. “Economics for the Common Good,” by Jean Tirole

Nobel Prize-winning economist Jean Tirole isn’t known for
his public policy advocacy -- instead, he’s the consummate academic,
penning highly mathematical theories that only a few people are
qualified to understand and apply. But in “Economics for the Common
Good,” Tirole descends from the ivory tower, offering a number of ways
that he believes economic models can inform public policy debates on a
huge variety of pressing issues."

1. “The Rise of Market Power and the Macroeconomic Implications,” by Jan De Loecker and Jan Eeckhout
4. “Economism: Bad Economics and the Rise of Inequality,” by James Kwak
5. The Ongoing Macro Debate
6. “WTF?: What’s the Future and Why It’s Up to Us,” by Tim O’Reilly and “Machine, Platform, Crowd: Harnessing Our Digital Future,” by Andrew McAfee and Erik Brynjolfsson
7. “The New Urban Crisis,” by Richard Florida
8. “The Power of Bias in Economics Research,” by John P. A. Ioannidis, T. D. Stanley, and Hristos Doucouliagos
9. “Gender Stereotyping in Academia: Evidence from Economics Job Market Rumors Forum,” by Alice H. Wu

Web-driven comparison shopping complicates Fed decisions on how
much and how fast to raise interest rates. Consumer knowledge is
keeping a lid on prices that retailers can charge on a wealth of goods, a
small but growing factor holding down inflation in the U.S., Japan and
other advanced economies"

"Fed officials, along with central bankers in Europe and Japan, want
inflation to rise to an annual rate of around 2%, considered a healthy
level for spending, business investment and higher wages. With the U.S.
economy expanding and showing very low unemployment, an interest-rate
increase would help forestall asset bubbles or other financial dangers."

Economists attribute feeble inflation across developed economies to
several causes, including aging populations, slow productivity growth
and globalization, which have reined in the ability of companies to
raise prices and wages." [it seems strange to say slow productivity growth holds down inflation since more productivity growth would shift supply curves to the right which lowers prices and later in the article they say that productivity is helped by this price competition-CM]

In a nod to the growing practice, Ms. Yellen said in September that
increased competition created by online retailers “may have reduced
price margins and restrained the ability of firms to raise prices in
response to rising demand.” She said in October that online shopping
“could be helping to hold down inflation in a persistent way in many
countries.” The Bank of Japan in has attributed part of the price declines at supermarkets to online shopping."

"online price competition may be subtracting as much as a tenth of a percentage point from core inflation"

"and quarter of a percentage point from core-goods inflation, as measured
by the personal-consumption expenditures index. It may not sound like
much, but with annual core inflation at just 1.4% in October, it is significant."

"The competition helps drive innovation and productivity, according to
economists, while giving consumers more for their money. And some
believe it will have a growing influence over central bank policy."

"Driven in part by Americans’ increasing taste for natural products, the price of vanilla has grown sixfold over the past three years."

"Vanilla bandits are plundering pods, which at about $600 a kilogram are
now more valuable than their weight in silver and come second only to
saffron in the spice price rankings."

"Farmers . . . have hired guards or spend their nights sleeping in their fields. On at
least four occasions this year, farmers have killed thieves caught
stealing vanilla from farms"

"Some communities, including Ambodiampana, whose neat wooden-slat houses
materialize out of the thick, green jungle on either side of a wide tar
road, have created village defense forces, which are staffed by the
strongest men. They are trained by the local gendarmes to guard access
to the area and bring thieves in to the authorities.

The mayhem in the Malagasy jungle, where about 80% of the world’s
vanilla is grown, is spurred by some of the world’s largest
packaged-foods companies, which are increasingly using natural—rather
than artificial—vanilla flavor in chocolates, ice creams and baked
goods. Natural vanilla flavor is now used in products including Nestlé
SA’s Crunch bars, McDonald’s Corp.’s vanilla soft serve and
Hershey Co.’s
Hershey’s Kisses.

In 2017, the market for U.S. vanilla
imports jumped to $402.4 million through October, from $232.8 million
during the same period in 2016, after more than doubling in 2016 from
the previous year, according to the U.S. International Trade Commission
and the U.S. Department of Commerce.

This year, the increase in
price for natural vanilla was compounded by a March cyclone that hit the
northeastern vanilla-producing region of Madagascar, which fueled
buyers’ worries about shortages."

"Vanilla plants are the only fruit-bearing orchid and it takes them about
three years to start producing beans—one reason why supply is lagging
demand."

"Vanilla farmers receive a fraction of the jump in prices for their
produce, with much of the profits staying with middlemen, who buy the
pods and then sell to exporters. Farmers in Ambodiampana said they get
about $200 a kilogram for their beans, about one-third the market price.
In the hope of shielding them from thieves, farmers have been picking
their beans before they’re ripe, which drastically reduces the amount
and quality of the vanilla that they yield."

"For now, smaller retailers like artisanal bakeries and gourmet ice-cream
makers are feeling the pinch more acutely than their mass-market
peers—they require higher-quality vanilla and the beans make up a much
higher percentage of their costs."

Doing so is called "birth tourism." Saipan is a U.S. territory and is only a 4-5 hour flight from China. Excerpts:

"The Northern Marianas, an island chain that includes Saipan, is the only
U.S. soil that Chinese can visit without a visa, after a change in
immigration policy in 2009 allowed Chinese and Russian tourists visa-free entry for up to 45 days."

"The number of Chinese visitors has risen substantially since 2009 and now represents 36% of tourists to the island"

"The number of American babies born here to Chinese women who entered as
tourists also climbed—to 472 last year from eight in 2009—according to
the Northern Marianas government. Last year, for the first time, more
Chinese tourists gave birth here than Americans."

There
is nothing illegal about birth tourism, provided the visitor has the
funds to pay for required medical procedures and doesn’t intend to
overstay"

"In China, websites advertising birth-tourism packages abound, with names
such as GlobalBaby8.com, promising luxurious birth vacations to Saipan.
The Chinese translator whose wife gave birth on Saipan said total costs
can exceed $50,000.

“Everyone is feeling unsafe in China,” the father said, citing among other things the political crackdown under President Xi Jinping.
“We will do anything for our kids.” The father still lives on Saipan
with his wife and children, and fears they will be deported."

"Doctors and administrators said the surge in the number of Chinese
mothers is overwhelming health facilities. “It’s a strain for the
community,” said
Esther Muna,
CEO of government health provider Commonwealth Healthcare
Corporation, which runs the hospital."

"unequal treatment in hiring and in the work setting is real and may be reflected in unequal pay.

Yet
it is also true that the time demands of many jobs can explain much of
the pay difference, a finding that has sobering implications.
Eliminating the gender earnings gap will require changes in millions of
households and thousands of individual workplaces.

Even
defining the gender earnings gap isn’t simple: It cannot be reduced to a
single number, though it often is expressed that way. According to a
commonly used measure adopted by the United States Census Bureau, women in 2016 earned 81 cents for each dollar earned by men, both working full-time.

This
definition focuses on the annual income of the individual at the median
— or middle — of the income distribution for men and for women. Another
valid option is to focus on mean, or average, earnings."

"The
gap is larger among more educated people, for example, and varies
according to occupation, often in big ways. Among college graduates, it
is far larger in business, finance and legal careers than in science and
technology jobs. In health care, it is larger when self-employment is
high (think dentists) and much lower when professionals are mainly
employees (think pharmacists).

What’s
more, the gap is a statistic that changes during the life of a worker.
Typically, it’s small when formal education ends and employment begins,
and it increases with age. More to the point, it increases when women
marry and when they begin bearing children.

Using
the data that shows women earn 81 cents for each dollar earned by men,
when the careers of recent college graduates start, the gap is much
smaller: 92 cents for each male dollar. By the time college-educated
women are 40 years old, they earn 73 cents.

Similar patterns appear using data for women and men who have earned master’s degrees
in business administration. Immediately after graduation, women earn 92
cents for each male dollar. A decade later they earn only 57 cents.

Correcting for time off and hours of work reduces the difference in the earnings between men and women but doesn’t eliminate it.

On
the face of it, that looks like proof of disparate treatment. It may
seem understandable that when a man works more hours than a woman, he
earns more. But why should his compensation per hour be greater, given
the same qualifications? But once again, the problem isn’t simple."

The
data shows that women disproportionately seek jobs — including
full-time jobs — that are more likely to mesh with family
responsibilities, which, for the most part, are still greater for women
than for men. So, the research shows, women tend to prefer jobs that
offer flexibility: the ability to shift hours of work and rearrange
shifts to accommodate emergencies at home.

Such
jobs tend to be more predictable, with fewer on-call hours and less
exposure to weekend and evening obligations. These advantages have a
negative consequence: lower earnings per hour, even when the number of
hours worked is the same.

Is
that unfair? Maybe. But it isn’t always an open-and-shut case.
Companies point out that flexibility is often expensive — more so in
some jobs than others.

Certain job characteristics have a big impact on the gender earnings gap. I have looked closely at these issues, including the extent to which workers are:

■ Subject to strict deadlines and time pressure

■ Expected to be in direct contact with other workers or clients

■ Instructed to develop cooperative working relationships

■ Assigned to work on highly specific projects

■ Unable to independently determine their tasks and goals

Occupations
with a lower level of these characteristics (like jobs in science and
technology) show smaller gaps, corrected for hours of work. Occupations
with a higher level (like those in finance and law) have greater gaps.
Men’s earnings tend to surge when there are fewer substitutes for a
given worker, when the job must be done in teams and when clients demand
specific lawyers, accountants, consultants and financial advisers. Such
differences can account for about half the gender earnings gap.

These
findings provide more nuance in explaining why the gap widens with age
and why it is greater for women with children. Whatever changes have
already taken place in American society, the duty of caring for children
— and for other family members — still weighs more heavily on women.
And if you thought that moving to a more family-friendly nation would
eliminate the gap, think again. In several nations, including Sweden and Denmark,
a “motherhood penalty” in earnings exists, even though these nations
have generous family policies, including paid family leave and
subsidized child care."

"In sum, the gap is mainly the upshot of two separate but related forces:
workplaces that pay more per hour to those who work longer and more
uncertain hours, and households in which women have assumed
disproportionately large responsibilities."

Friday, December 15, 2017

Should society call
entrepreneurs heroes? Are they like heroes from mythology? Those may seem like
strange questions for an economist to ask. But they matter for several reasons.
Dwight Lee and Candace Allen argued that if we don't honor entrepreneurial accomplishments,
we won't get enough startups. Deirdre McCloskey says that economic growth only
took off around the year 1800 because the West began according dignity to
entrepreneurs. The work of entrepreneurs parallels the hero's adventure in
mythology. The idea has been gaining attention recently, being discussed in The Wall Street Journal while Jeffery
McMullen has called for scholars to once again take it seriously. Even Joseph
Campbell, the author of The Hero With a
Thousand Faces, one of the inspirations for Star Wars, called the
entrepreneur the real hero in American capitalistic society in a radio
interview (see appendix).

Cyril Morong was the first to examine the similarities
between entrepreneurs and mythological heroes.[i],[ii]
He compared entrepreneurship research to The
Hero With a Thousand Faces to see if the activities of entrepreneurs corresponded
to the hero's adventure. What is the hero's adventure? According to Campbell

"The standard
path of the mythological adventure of the hero is a magnification of the
formula represented in the rites of passage: separation-initiation-return,
which might be named the nuclear unit of the monomyth. A hero ventures forth
from the world of common day into a region of supernatural wonder; fabulous
forces are there encountered and a decisive victory is won; the hero comes back
from this mysterious adventure with the power to bestow boons on his fellow
man."

How is this similar to
the entrepreneur's adventure?

The hero's journey begins with a call to adventure. He or
she is awakened by some herald which touches his or her unconscious world and
creative destiny. The entrepreneur, too, is "called" to the
adventure. By chance, he or she discovers a previously unknown product or way
to make a profit. The lucky discovery cannot be planned and is itself the
herald of the adventure. Israel Kirzner sees successful entrepreneurship as
result of a lucky discovery of a new opportunity for economic profit, but it is
luck that was due to alertness while leading a life of purposeful action.[iii]

The entrepreneur must step out of the ordinary way of
producing and into his or her imagination about the way things could be to
discover the previously undreamt of technique or product. The "fabulous
forces" might be applying the assembly line technique or interchangeable
parts to producing automobiles or building microcomputers in a garage. The
mysterious adventure is the time spent tinkering in research and development.
But once those techniques are discovered or developed, the entrepreneur now has
the power to bestow this boon on the rest of humankind.

Heroes and entrepreneurs both bring change. Campbell
refers to the constant change in the universe as "The Cosmogonic
Cycle" which "unrolls the great vision of the creation and destruction
of the world which is vouchsafed as revelation to the successful hero."
This is similar to Joseph Schumpeter's theory of entrepreneurship called
“creative destruction.” A successful entrepreneur simultaneously destroys and
creates a new world, or at least a new way of life. Henry Ford, for example,
destroyed the horse and buggy age while creating the age of the automobile. The
hero also finds that the world "suffers from a symbolical deficiency"
and "appears on the scene in various forms according to the changing needs
of the race." The changing needs and the deficiency correspond to the
changing market conditions or the changing desires for products. The
entrepreneur is the first person to perceive the changing needs.

Candace Allen and Dwight Lee say that "society needs
heroes" and that "entrepreneurs are heroes in every sense." Yet
they are not often see as heroes-in fact the opposite seems to be true even
though they are indispensable to economic progress. One problem is that
economists have not generally promoted entrepreneurs as being important. They
acknowledge that creative destruction was "the hallmark of
entrepreneurship" without mentioning the parallel to Campbell.
Entrepreneurs are motivated not just by money but also by "service to
something transcendental."Their views
can be summed up with:

“Just as the society that doesn't
venerate winners of races will produce fewer champion runners than the society
that does, the society that does not honor entrepreneurial accomplishment will
find fewer people of ability engaged in wealth creation than the society that
does.”[iv]

Dwight Lee and Candace Allen Smith covered similar ground
in a later article but also used Campbell, notably the
"separation-initiation-return" core of the monomyth (although they
still missed the creation destruction connection between Campbell and
Schumpeter). They suggest that entrepreneurs are seen negatively due to
political biases and the fact that their role in capitalism is poorly
understood.[v]
Calling them heroes might offset this.

Jeffery McMullen argues that seeing entrepreneurs as heroes
doesn't mean that they are hyper-individualistic lone rangers, cutoff from the
rest of society. They may receive some community support, but a new venture
still requires someone to act, to take the first step. This requires courage
due to uncertainty. They are heroic because they bear personal costs. McMullen
also bases his observations on the work of Campbell and Schumpeter. He calls on
scholars to end their hostility to calling entrepreneurs heroes. Otherwise, we
are all "vulnerable to the tyranny of cautious conformity while subjecting
our social systems to the constant threat of stagnation."[vi]

Charles Murnieks, Jeffery McMullen, and Melissa Cardon also
mention entrepreneurs being heroes (citing Campbell and Schumpeter). Using
surveys, they found that entrepreneurs experienced positive emotions (PE) when
they perceived that their self-identity as entrepreneurs matched that of
society or their environment. That is, if the entrepreneurs saw themselves as
risk-takers who enhance social welfare, and if the entrepreneurs thought that
society saw them that way as well, positive emotions were experienced.

Their empirical findings may support Allen and Lee's
contention that society should honor entrepreneurial accomplishments:

"challenging environments are part of
what makes a hero’s actions valiant. In a similar manner, we contend that
dynamic environments may play a key role in framing an entrepreneur’s actions
as courageous or innovative, because the individual is seen to act in the face
of uncertainty and turbulence. Stakeholders (such as mentors, family members,
or investors) who advise entrepreneurs should know and accentuate this point.
By providing reaffirming feedback in dynamic and challenging environments,
these stakeholders can elevate the PE experienced by the entrepreneur and
motivate them to continue on their journey. In essence, this strategy can help
separate the generation of PE from the success of the venture in some cases."[vii]

The "reaffirming
feedback" is a way to honor the entrepreneur which motivates them to
"continue on their journey."

The idea that entrepreneurs might be heroes is now
starting to reach the popular media. Barbara Haislip reported on how
storytelling, especially about the founders, can be a marketing tool for
businesses. She interviewed Angela Randolph of Babson College who said “Stories
about founders and new innovations are often in the form of a myth and follow
the hero’s journey.” Randolph then described the hero's journey as outlined in
Campbell. Telling the founding story about "the hero’s call to
action...pulls the audience in" if they can trigger "strong
emotions."[viii]

This question may be relevant now since entrepreneurship
may be in decline. Jeffrey Sparshott reported that “the share of private firms
less than a year old has dropped from more than 12 percent during much of the
1980s to only about 8 percent since 2010. In 2014, the most recent year of
data, the startup rate was the second-lowest on record, after 2010.”[ix]
Honoring and respecting the work of entrepreneurs might be a way to reverse
this trend.[x]

Also, historically, it may have only been when
entrepreneurs became respected that economic growth took off. Deirdre McCloskey
argues that what made the world so wealthy today, when average world income in
1800 was just $1 to $5 per day (adjusted for inflation) was a change in ideas:

"...in
Holland and then in England. The revolutions and reformations of Europe, 1517
to 1789, gave voice to ordinary people outside the bishops and aristocrats.
Europeans and then others came to admire entrepreneurs..."

It was a "Middle-Class
Deal" that gave entrepreneurs dignity and liberty to seek profit and
generate social welfare. This led to a flurry of inventions, innovations and
new institutions that made our modern world and therefore "the ordinary
people, and especially the very poor, were made much, much better off."
She even says "People had to start liking "creative destruction...""[xi]

In fact, one of her books is titled Bourgeois Dignity: Why Economics Can’t Explain the Modern World.
McCloskey writes

"that
the modern world was made not by the usual material causes, such as coal or
thrift or capital or exports or imperialism or good property rights or even
good science, all of which have been widespread in other cultures and at other
times."[xii]

McCloskey even credits "the
Kirznerian entrepreneur [for allowing her] to make progress on the puzzle of
economic growth." What is entrepreneurship? It is an "unhirable
factor" or "alertness" and "can't be something that can be
provided routinely, such as the services of banking or management. It must be
creative."[xiii]
Creativity comes from stepping outside the normal way of doing things,
"jumping over the edge and moving into the adventure" (see the
Campbell interview in the appendix). So the entrepreneur is just like the hero
in mythology.[xiv]

Appendix

Tape #1901: "Call of the Hero" with
Joseph Campbell interviewed by Michael Toms. New Dimensions Foundation audio
tape from a live interview on SanFrancisco's radio station KQED. The following exchange was part of a
discussion of the question of: What is creativity?

Toms: In a sense it's the going for, the jumping
over the edge and moving into the adventure that really catalyzes the
creativity, isn't it?

Campbell: Well, my wife is a dancer. She has had
dance companies for many, many years. I don't know whether I should talk about
this. But when the young people are really adventuring, it's amazing what guts
they have and what meager lives they can be living, and yet the richness of the
action in the studio. Then, you are going to have a concert season. They all
have to join a union. And as soon as they join a union, their character changes. (emphasis added, but Campbell changed the
tone of his voice) There are rules of how many hours a day you can rehearse.
There are certain rules of how many weeks of rehearsal you can have. They bring
this down like a sledgehammer on the whole thing. There are two mentalities.
There's the mentality of security, of money. And there's the mentality of open
risk.

Toms: In other societies we can look and see that
there are those that honor elders. In our society it seems much like the elders
are part of the main stream and there is a continual kind of wanting to turn
away from what the elders have to say, the way it is, the way to do it. The
union example is a typical one, where the authority, institution, namely the
union comes in and says this is the way it's done. And then one has to fall into
line or one has to find something else to do.

Campbell: That's right.

Toms: And it's like treating this dichotomy
between elders and the sons and daughters of the elders. How do you see that in
relationship to other cultures?

Campbell: This comes to the conflict of the art,
the creative art and economic security. I don't think I have seen it in other
cultures. The artist doesn't have to buck against quite the odds that he has to
buck against today.

Toms: The artist is honored in other cultures.

Campbell: He is honored and quickly honored. But
you might hit it off, something that really strikes the need and requirements
of the day. Then you've given your gift early. But basically it is a real risk.
I think that is so in any adventure, even in business, the man who has the idea
of a new kind of gift (emphasis
added) to society and he is willing to risk it (this is exactly what George
Gilder says in chapter three, "The Returns of Giving" in his book Wealth and Poverty). Then the workers
come in and claim they are the ones that did it. Then he (the entrepreneur)
can't afford to perform his performance. It's a grotesque conflict, I think
between the security and the creativity ideas. The entrepreneur is a creator;
he's running a risk.

Toms: Maybe in American capitalistic society the
entrepreneur is the creative hero in some sense.

Campbell:
Oh, I think he is, I mean the real one. Most people go into economic activities
not for risk but for security. You see what I mean. And the elder psychology
tends to take over.

This discussion ended and after a short break a
new topic was discussed.

[i]
Cyril Morong, "The Creative-Destroyers: Are Entrepreneurs Mythological
Heroes?" (Presented at the annual meetings of the Western Economic
Association, July), 1992, available at:
http://cyrilmorong.com/CreativeDestroyers.pdf

Cyril Morong, "The Calling of the
Entrepreneur," The New Leaders: The
Business Bulletin for Transformative Leadership, November/December 1992, p.
4, available at:http://cyrilmorong.com/ENTREPRENEURshort.pdf

[ii] Wyn Wachhorst in Thomas
Alva Edison: An American Myth (Cambridge, MA: MIT Press, 1981), pp.74-86,
uses Joseph Campbell's book The Hero With
a Thousand Faces to analyze part of Edison's early life, although Wachhorst
suggests that Edison might have been more trickster than hero. Wachhorst quotes
David McClelland from The Achieving
Society with: "Interestingly, David McClelland found that Hermes, the
trickster of the Greek pantheon, is the mythological type which best reflects
the "achievement personality [of entrepreneurs]."" Morong
(1992a) also mentions tricksters. The word entrepreneur does not appear in the
index of the Edison book. So Wachhorst probably did not look at any research on
entrepreneurs in general. He did not mention Schumpeter and creative
destruction, either. Wachhorst often compares Edison to Prometheus, suggesting
that using electricity is like stealing fire.

From personal
correspondence with Israel Kirzner he writes "I should point out in my own
treatment of the entrepreneur, he is not seen as a "hero." Moreover,
in my own treatment pure luck is not seen as entrepreneurial. (but as the act
of deliberately putting oneself into a situation which one hopes will
prove lucky is entrepreneurial)." It is my contention that the best
way for a person to put themselves into a situation in which they will be lucky
is for them to follow Campbell's advice that is based on his analysis of the
hero's adventure. This is to follow your bliss, to listen to the wisdom of your
heart and do what you love, not what the social system would have you do. If
you follow your bliss, you are a hero. I believe that the most successful
entrepreneurs follow their bliss and are therefore heroes. Jeffery McMullen
(cited below) also mentions that entrepreneurs follow their bliss.

Joseph Schumpeter, The
Theory of Economic Development (New Brunswick, NJ:Transaction Books, 1983),
p. 923 lists three classes of motives for entrepreneurship: the will to found
private kingdom, the will to conquer, and the joy of creating. The first,
although seemingly only greedy, ranges, however, from "spiritual ambition
down to mere snobbery." The second was like a sporting event, with money
used to keep score, and not an end in itself. The entrepreneur of the third
class of motives is in it for the sake of "exercising one's energy and ingenuity"
and for the delight in venturing. All three classes of motives are
anti-hedonistic, with the third being the most so. This certainly makes it
plausible to see the entrepreneur as someone who follows his or her bliss.

[x] Allen and Lee (1996) mention that "during the
1980s almost 90 percent of all business characters on television were portrayed
as corrupt." It does not seem like there are many movies or TV programs
even now that show entrepreneurs in a positive light.

[xi] Deirdre McCloskey, "Liberty and Dignity Explain
the Modern World": An Essay Based on Bourgeois
Dignity: Why Economics Can't Explain the Modern World, November 2011,
available at: http://www.deirdremccloskey.com/articles/bd/briefBD.php.

[xiii] Deirdre McCloskey, "A Kirznerian Economic
History of the Modern World,"June
17, 2011, available at: http://www.deirdremccloskey.com/editorials/kirzner.php

[xiv] McCloskey also writes that the growing freedom and
increasing respect for entrepreneurs "created more and more opportunities
for Kirznerian alertness." Furthermore "Austrian discovery and
creativity depends also on the other virtues, in particular on Courage and
Hope" and "A new rhetorical environment in the eighteenth century
encouraged (literally: "gave courage" to the hope of) entrepreneurs."
She does, however, see a weakness in that Kirzner does not consider the
audience of the entrepreneur, the customers and the rhetoric they use.

Tuesday, December 05, 2017

They seem to be saying that there has been a decrease in supply. That will cause prices to rise and quantity to fall. But just because there are fewer trees for sale than there used to be does not mean there is a shortage. That requires that quantity demanded is greater than quantity supplied. They are equal, although at a lower quantity than before.

Excerpts:

"This Christmas, supplies of live trees are tight. Some Christmas tree
lots are closing almost as soon as they open, citing a shortage of
trees and presaging a potential national run on firs this weekend,
traditionally the busiest of the tree-buying season.

Some
suppliers blame extreme weather this past year. Some blame changes to
agriculture, like small farmers in Oregon, the biggest tree-producing
state, turning to grapes and cannabis instead.

But most growers blame the Great Recession.

It
takes seven years to 10 years to grow a tree. Many farmers planted
fewer seedlings or went out of business altogether in the years after
the housing bust, when consumers pulled back spending. At the
same time, total acreage in production declined 30% between 2002 and
2012, according to the latest federal data available.

The ensuing tightening of supply started last year and live-tree
buyers spent an average of $74.70, more than double the average in 2011,
according to the National Christmas Tree Association, a trade
association for the live-tree industry. To meet 2016 contracts, some
growers cut trees from this year’s crop early, making the 2017 supply
even leaner.

The lack of supply is being felt most acutely in states including
Florida, Arizona and Illinois—those farther from Oregon and North
Carolina, which account for 37% and 25%, respectively, of Christmas tree
production.

Customers are likely to pay at least 10% more than
last year for a 5-foot to 7-foot tree, and up to 20% more for a taller
tree, said
Steve Troxler,
agricultural commissioner for North Carolina."